17 October 2022

Update on the Mini Budget U-Turn!

I am writing to you with more changes and reversals to the Kwarteng mini-budget that wasn’t a budget.
In short, most of what he announced has been ditched by the new chancellor Jeremy Hunt.
I am hesitant to say that these new announcements are going to remain. After all, we are living in “interesting times”. Things could change further by the time we get to the 31st of October, when the chancellor will reveal the full financial statement.

What we know now:
– The basic income tax rate remains at 20% and will likely stay there for the foreseeable future.
– The 45% higher tax rate is here to stay.
– The planned reversal in the increase to Dividend Tax in April has been cancelled.
– The repeal of the 2017 and 2021 changes to off-payroll rules, AKA IR35, is now cancelled. This means the burden of proving that a contractor is not a disguised employee rests again with the employer.
– The help with energy costs is still going ahead until April. From April, there will likely be a different and more targeted regime to help with energy costs.
– The planned increases in the duty rates for beer, cider, wine and spirits will now go ahead.
– VAT-free shopping for non-UK visitors scrapped.

You may be pleased to know that the cuts to stamp duty and National Insurance remain in place. These are very small crumbs of comfort. 

The likelihood is that there will be more announcements on the 31st of October.

We will, of course, then give you a full rundown of any changes which will impact you or your business. 

Our thoughts:
It’s ain’t over until the fat lady sings. At the moment, we seem to have no idea whether the lady in question is clearing her throat or even thinking about going to perform.

What is clear is that the Conservative government is in turmoil right now. The political gossip columns are humming with different leadership scenarios. None of them seems to involve Liz Truss in them…

Initial market reactions seem positive about Jeremy Hunt’s new plans for GB PLC. At the time of writing, the pound was making tiny gains against the dollar. But still a long way off the dizzy exchange rate heights in August of US $1.20 dollar to the pound. Remember that at this point last year, £1 would buy you US $1.37.  

As a fellow business owner, I hope for stability and certainty in the months ahead. After all, that is what we all need to be able to plan and take decisions for the future. However, don’t assume that we are now entering into stable waters. 

This is what I still think we can rely on going forward:
– The cost of living crisis is going to bite hard over the winter
– It is important to keep an eye on your business’s cash going forward
– It will be harder to access to finance.
– The turmoil will bring opportunities for business owners who are managing their finances carefully and prepared to be bold and take good decisions.

If you are uncertain about the future or how to cope with the headwinds coming your way, then get in touch. We are here to help.

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